Indian Government Urged to Set up Alternative to SWIFT Payment System Over US Misuse

The United States has repeatedly threatened a number of countries with sanctions or to block access to SWIFT over policies that it doesn't agree with.

India's joint parliamentary committee has strongly recommended introducing an alternative to the US-dominated SWIFT electronic payment network, citing possible chances of breach of privacy in the financial system.

The committee submitted its 542-page report to the parliament on Thursday after months of deliberations on the country's proposed bill on the protection of citizens' data.

"The Committee observes that data protection in the financial sector is a matter of genuine concern worldwide, particularly when through the SWIFT network, privacy has been compromised widely. Indian citizens are engaged in huge cross-border payments using the same network," the report read.

In support of its claim about a data breach, the committee has mentioned that SWIFT had compromised the database after the 11 September 2001 terrorist attacks in the US.

"In 2006, the Belgian government declared that these SWIFT dealings with American government authorities (Central Intelligence Agency, US Treasury Department, others) were a breach of Belgian and European privacy law," the report mentioned.

The committee said that an alternative to the SWIFT payment system will ensure privacy and boost the domestic digital economy.

The Reserve Bank of India, in its report in January this year, said that messages formatted to SWIFT standards are read and processed by many financial processing systems, whether the message travelled over the SWIFT network or not. "In India, the SWIFT messaging standards are used for all cross-border payment transactions," it said.

If India develops an alternative domestic financial messaging system, it will join countries like Russia and China, which have such a system in place.

A media report in 2019 read that the RIC (Russia-India-China) are exploring an alternative to SWIFT to smooth trade with countries such as Iran, which are saddled with American sanctions.

Russia had developed an alternate financial message system in 2014 when it was facing threats from the Obama administration of removal from the SWIFT network. Earlier this month, media reports claimed that the Biden administration is mulling to cut Russia from the SWIFT network amid the conflict over Ukraine.

The investment banking unit of Bank of China alerted the country's lenders in its July 2020 report to use the Cross-Border Interbank Payment System (CIPS)—set up in 2015-- instead of SWIFT to reduce the exposure of China's global payments data to the US.

Connected with over 11,000 financial institutions, SWIFT has processed more than 10 billion messages in 2021 alone, facilitating trillions of dollars in cross-border payments.